In 1955, Simon Kuznets, a development economist, presented a theory of the relationship between income inequality in a country and the path to becoming a rich developed country. He argued that income inequality increased in the early decades, when countries were “taking off” at catch-up rates of GDP growth (6-10% per annum), and when countries became rich, income inequality decreased (the Kuznets Curve). This idea stuck, and thus income inequality came to be seen as “a price to pay” for rapid growth. The problem, however, was that it was wrong. Mr Kuznets had little data, which was really only collected since about 1962 for developing economies. Hans Rowlings has shown us that the data since 1962 tells us to throw out many pre-conceived ideas (see www.ted.com), and one of them is the Kuznets Curve.
In the wake of excitement about the 1 April elections comes a surge of expectations about the economy. Politicians will have to handle that issue, because it will take years for economic reforms to be implemented and to have an impact. Foreign investors are now looking and planning, but their big investments will not hit the ground for some years. Living standards and job creation are not going to improve much more than usual over the next two years.
The bureaucratic wheels of donor organisations are also turning, but they will take even longer than foreign investors.
THERE are striking parallels between the economy of Vietnam in the 1990s and that of Myanmar today. Of course there are also many differences, but the similarities suggest that there are lessons for Myanmar as it opens its economy to the world, particularly given that Vietnam has averaged 7-8 percent annual GDP growth for the past two decades.
A key question is what economic reforms should Myanmar focus on in 2012 and during the immediate post-sanctions period?
IS Myanmar the last “donor frontier”? With a mostly impoverished population of 60 million that has had little development assistance for decades, it would appear so. North Korea and Cuba are much smaller, and after this cohort there are no new “donor-restricted” countries of substance.
And now Myanmar is indeed opening up: Daw Aung San Suu Kyi is going to stand in the next elections as the leader of her party; political prisoners continue to be released, and most are likely to be free soon; and the United States has endorsed the reform process with a visit by Hillary Clinton.
On September 13th 2012 Mekong Economics' Chief Economist, Dr. Adam McCarty, presented at the 14th Annual Asia Cementrade conference in Yangon, Myanmar. His presentation covered the current state of the Myanmar economy and its path towards development
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